In order to fulfil the aims of the CARICOM Single Market and Economy (CSME) and the wider CARICOM policy of further economic integration, officials in the Caribbean have identified a number of key sectors that form the backbone of regional convergence, from financial services to transport and education. In 2006 a revised Treaty of Chaguaramas came into force that turned CARICOM – formerly a common market – into a single market based on the free movement of goods, services, capital and labour. The organisation’s Council for Trade and Economic Development is taking the lead in implementing the single market.
Financial Services
Jamaica has been a global leader in financial services, with the Financial Times recognising its stock exchange as the best-performing in the world in October 2019. The exchange grew by 35% in the 12 months leading to October 2019, and by 600% since 2014. Its success has trickled down to other regional stock exchanges as investors turn their sights toward the region. “In 2019 the Trinidad and Tobago Composite Index was up by 12.7%,” Adrian Manmohan, CEO of West Indies Stock Brokers, told OBG. “The expansion was largely attributed to the success of the Jamaican stocks – we are riding the Jamaican wave.”
The revised treaty included provisions regarding financial services integration such as the removal of restrictions on equity and portfolio investments, bank transactions and credit, and interest payments and dividends, as well as the repatriation of investment profits. It also harmonised the legal and administrative processes for partnerships and companies, mandated the free convertibility of currencies, and proposed an integrated capital market. However, formal capital market integration has thus far been limited to securities between Barbados, Jamaica, the Organisation of Eastern Caribbean States and T&T.
Intra-regional Air Connectivity
Given the relatively geographical spread and scattered and small populations across the Caribbean, air connectivity is not as comprehensive as other regions. A 2016 study from the International Air Transport Association identified a correlation between air connectivity – in this case cargo – and any given country’s overall trade. The study showed that a 1% increase in air connectivity can be directly linked to a 6.3% rise in a country’s trade.
It is hoped that greater intra-regional air connectivity will result in greater trade and social integration. The 2018 Transport Competitiveness and Connectivity Study from the Caribbean Development Bank (CDB) showed a decline in intra-regional traffic for all but six countries in the Caribbean between 2008 and 2018, despite greater openness to global markets and an increase in air traffic arriving to and departing from the region. According to the CDB, high operating costs, a lack of liberalisation in air services and the absence of regulatory harmonisation were among the main obstacles to increased inter-regional air traffic. In order to boost connectivity and encourage further economic integration, the report recommended a reduction in aviation taxes and charges, regulatory harmonisation and more efficient use of operations.
The region took a step towards harmonised regulations with the signing of an open skies agreement. Belize, Guyana, St Vincent and the Grenadines, and Suriname were the first to sign the agreement in February 2018, with Jamaica and T&T joining in February 2019. The CARICOM Multilateral Air Services Agreement mandates no restrictions on routes and tariffs, but increases cooperation between civil aviation authorities.
Shipping
Around 90% of the region’s trade is carried by sea due to its dispersed geography and largely oceanic borders. Since the completion of the widening of the Panama Canal in 2016 there has been a boost in Caribbean countries’ extra-regional connectivity. Regional ports also gained in prominence, serving as gateways to the Americas, the Far East and Europe.
There are barriers to increased maritime capacity, however. Maritime and insurance costs are 30% higher than the world average due to outdated port infrastructure, Customs fees and a reliance on manual labour.
Trade volumes inside CARICOM are not yet large enough for short-sea shipping (SSS), or the movement of cargo goods over shorter distances without crossing an ocean. A 2018 study by the Inter-American Development Bank found that because inter-island trade volumes are not yet substantial enough in the east and south, governments would have to subsidise SSS, whereas in the northern Caribbean, Jamaica and the Bahamas are already well connected to global routes. What is more, because of low volumes, the amount of investment in infrastructure and equipment upgrades needed may not generate the required returns.
Similarly to air connectivity, port handling charges could be reduced for intra-regional shipments that are less than the volume of a container. The implementation of modernised systems and electronic harmonisation of the tracking of goods across the region would ease restrictions on operators, improve inefficiencies and lower costs along the entire supply chain.
Agriculture
Because many Caribbean countries produce similar agricultural goods, intra-regional competition is high, thus posing a challenge for integration of the sector. CARICOM’s 2015-19 Community Strategic Plan identified agriculture as a key component of economic growth and looked to turn the regional agriculture and fisheries sector as an economic space for growth and export development.
CARICOM implemented three policies aimed at integrating the agriculture sector: the Common Agricultural Policy (CAP), the Caribbean Community Common Fisheries Policy (CCCFP), and the Regional Food and Nutrition Policy (RFNSP). The CAP was adopted in October 2011 and has five key aims: to boost roof and nutrition security, increase production of cross-border investments, encourage the sustainable development of natural resources, embark on rural modernisation; and implement youth programmes. The CCCFP focuses on conserving, managing and sustainably using fisheries and related ecosystems, while the RFNSP aims to reduce hunger by ensuring access to affordable, nutritious and safe food, as well as shift towards sustainable food production systems that provide farmers adequate compensation for their products.
Education
One of the cornerstones to increased social integration in other single markets has been through enhanced collaboration in education. One of the most well-known examples of this is the Erasmus study abroad programme in the EU. Although CARICOM does not yet have such a formalised scheme, it has harmonised education policies and programmes.
All member states, with the exception of Haiti, have achieved universal access to primary education, and many are close to achieving it at the secondary level. As such, students in the region are staying in school longer, from 4.3 years in 1960 to 10.3 years in 2015. Secondary educational institutions have also begun to benchmark exams against a common assessment.
Officials identified education as a key component in increasing regional collaboration on both the formal and informal sectors. In December 2019 Barbados announced it would provide free access to its public schools for CARICOM students up to the age of 16.
The regional body is also looking to coordinate education policies to ensure that graduates are equipped with the knowledge and skills necessary to thrive in a changing, technology-driven workplace. In February 2018 the CARICOM Human Resource Development 2030 Strategy was developed to reform basic education and early childhood development, promote lifelong skills learning at the primary and secondary level, and enable students to attend tertiary institutions. In addition, it seeks to make distance and online learning an option for both formal and training institutions.
E-commerce
Many countries in the region have cash economies and T&T is no exception, with a credit card penetration rate of 20%. In Jamaica and Guyana 90% and 95% of all purchases are made using cash, respectively.
Trinbagonian firms are trying to change this. In 2017 WiPay, a local payment platform that allows users to make, accept and process payments via a smartphone, was launched. It expanded into Guyana in 2018 and more recently into Jamaica in June 2019. The company hopes to soon launch in Saint Lucia, raising the possibility of further economic integration for both business-to-business and business-to-consumer purposes.
New financial technology services will play a particularly important role in incorporating the under-banked and unbanked into the financial system. Not only could platforms such as WiPay change the way that goods and services are exchanged throughout CARICOM, but it could lead to a more regionalised and inclusive marketplace for the entire Caribbean. As countries around the world become increasingly digitalised and digital penetration among the population grows, new payment systems will form a cornerstone of global trade flows. Moving into the 2020s, increased smartphone penetration and digital literacy of CARICOM citizens will mean that this region will be no exception.
